A recent report by the Bank for International Settlements highlights the growing concern that cryptocurrency exchanges are increasingly offering services similar to traditional banks, such as lending and yield products, but without the same level of protection for users. The report notes that these exchanges have evolved into complex financial institutions, offering a range of services that typically would be provided by separate entities such as banks, brokers, and exchanges. The main concern is the rapid growth of 'earn' and yield products, which are often marketed to individual users as a way to generate passive income from their cryptocurrency assets.
However, these products are often structured more like unsecured loans than savings accounts, and they lack the safeguards and insurance that traditional banking provides. Users of these platforms often relinquish control of their assets, which are then used for various activities such as lending, trading, and market-making, with the returns paid to customers being a share of the profits generated. The report warns that users are exposed to the risk of the platform's insolvency and highlights the lack of transparency regarding how assets are used. The collapse of companies such as Celsius Network and FTX is cited as an example of the risks associated with these types of arrangements.
The report also references the flash crash of October 2025, which resulted in an estimated $19 billion in forced liquidations across crypto derivatives markets, as an example of how quickly these risks can materialize.